Paying tuition fees for the college education of your son who is graduating in high school this year, paying your credit card debt that has already accumulated over time, or just maintaining the current lifestyle that your family had decided to have; these activities require cashflow planning if you want less or no headache at all.

 Cashflow planning involves listing down your household’s future cash requirements in order to achieve its financial goals. A cash need could mean a much longer period when it is about planning for retirement 20 years from now.

 What is cashflow? It’s the amount of cash that you and other members of your household produce as a result of doing some activities.  The products can be in the form of salaries, rental income, or income from your stock or fixed-income investments. Another component of cashflow is the expenses that you incurred regularly or at any point in time.

 In a (comprehensive) financial plan (which I painted in broad strokes earlier), the most important component is cashflow planning since all major decisions emanate from this. It is said that cashflow planning is the lifeblood of all household activities. Having a good cashflow is a desirable situation since it will be easier for you to plan your financial future while having a bad (or weak cashflow) will surely be a very challenging situation. A weak cashflow could be a result of a poor management of the household’s revenues and expenses.

 So, before even going further into your financial plan, you have to list down your financial goals and plan out how to achieve them by taking seriously your cashflow planning.